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all plant that relles heavlly on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of whích 60% Is direct or cost. st year, the company sold 58,000 of these balls, with the following results: sales (58,000 balls) variable expenses contribution margin Fixed expenses $ 1,450,000 870,e00 58e,eee 374,000 let operating income 206,000 quired: Compute (a) last year's CM ratio and the break-even polnt in balls, and (b) the degree of operating leverage at last year's sales level. Due to an Increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this ange takes place and the selling price per ball remalns constant at $25.00, what will be next year's CM ratio and the break-even Int In balls? Refer to the data in (2) above. If the expected change in varlable expenses takes place, how many balls will have to be sold next ar to earn the same net operating income, $206,000, as last year? Refer to the original data. The company Is discussing the construction of a new, automated manufacturing plant. The new plant uld slash varlable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is bult, what

all plant that relles heavlly on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of whích 60% Is direct or cost. st year, the company sold 58,000 of these balls, with the following results: sales (58,000 balls) variable expenses contribution margin Fixed expenses $ 1,450,000 870,e00 58e,eee 374,000 let operating income 206,000 quired: Compute (a) last year's CM ratio and the break-even polnt in balls, and (b) the degree of operating leverage at last year's sales level. Due to an Increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this ange takes place and the selling price per ball remalns constant at $25.00, what will be next year's CM ratio and the break-even Int In balls? Refer to the data in (2) above. If the expected change in varlable expenses takes place, how many balls will have to be sold next ar to earn the same net operating income, $206,000, as last year? Refer to the original data. The company Is discussing the construction of a new, automated manufacturing plant. The new plant uld slash varlable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is bult, what

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball Is manufactured In a small plant that relles heavly on direct labor workers. Thus, varlable expenses are high, totallng $15.00 per ball, of which 60% Is direct labor cost. Last year, the company sold 58,000 of these balls, with the following results: $ 1,450,000 Sales (58,800 balls) variable expenses Contribution margin Fixed expenses 870,000 580,000 374,000 Net operating income 206,000 Required: 1. Compute (a) last year's CM ratio and the break-even polnt in balls, and (b) the degree of operating leverage at last year's sales level. 2. Due to an Increase in labor rates, the company estimates that next year's varlable expenses will Increase by $3.00 per ball. If this change takes place and the selling price per ball remalns constant at $25.00, what will be next year's CM ratio and the break-even polnt in balls? 3. Refer to the data in (2) above. If the expected change in varlable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $206,000, as last year? 4. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash varlable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is bullt, what would be the company's new CM ratio and new break-even point in balls? Complete this question by entering your answers in the tabs below. Reg 2 Reg 4 Req 1 Req 3 Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. (Round "Unit sales to break even" to the nearest whole unit and other answers to 2 decimal places.) CM Ratio % Unit sales to break even balls Degree of operating leverage < Req 1 Req 2 >
Transcribed Image Text:Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball Is manufactured In a small plant that relles heavly on direct labor workers. Thus, varlable expenses are high, totallng $15.00 per ball, of which 60% Is direct labor cost. Last year, the company sold 58,000 of these balls, with the following results: $ 1,450,000 Sales (58,800 balls) variable expenses Contribution margin Fixed expenses 870,000 580,000 374,000 Net operating income 206,000 Required: 1. Compute (a) last year's CM ratio and the break-even polnt in balls, and (b) the degree of operating leverage at last year's sales level. 2. Due to an Increase in labor rates, the company estimates that next year's varlable expenses will Increase by $3.00 per ball. If this change takes place and the selling price per ball remalns constant at $25.00, what will be next year's CM ratio and the break-even polnt in balls? 3. Refer to the data in (2) above. If the expected change in varlable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $206,000, as last year? 4. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash varlable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is bullt, what would be the company's new CM ratio and new break-even point in balls? Complete this question by entering your answers in the tabs below. Reg 2 Reg 4 Req 1 Req 3 Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. (Round "Unit sales to break even" to the nearest whole unit and other answers to 2 decimal places.) CM Ratio % Unit sales to break even balls Degree of operating leverage < Req 1 Req 2 >
Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured In a small plant that relles heavlly on direct labor workers. Thus, varlable expenses are high, totaling $15.00 per ball, of which 60% Is direct labor cost. Last year, the company sold 58,000 of these balls, with the following results: $ 1,450,000 sales (58,000 balls) Variable expenses Contribution margin Fixed expenses 870,000 580,000 374,000 Net operating income 206,000 Requlred: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. 2. Due to an Increase in labor rates, the company estimates that next year's varlable expenses will Increase by $3.00 per ball. If this change takes place and the selling price per ball remalns constant at $25.00, what wll be next year's CM ratio and the break-even polnt in balls? 3. Refer to the data in (2) above. If the expected change in varlable expenses takes place, how many balls will have to be sold next year to earn the same net operating Income, $206,000, as last year? 4. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash varlable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is bullt, what would be the company's new CM ratilo and new break-even polnt in balls? Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req 3 Req 4 Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls? (Round "CM Ratio" to 2 decimal places and "Unit sales to break even" to the nearest whole unit.) CM Ratio % Unit sales to break even balls < Req 1 Req 3 >
Transcribed Image Text:Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured In a small plant that relles heavlly on direct labor workers. Thus, varlable expenses are high, totaling $15.00 per ball, of which 60% Is direct labor cost. Last year, the company sold 58,000 of these balls, with the following results: $ 1,450,000 sales (58,000 balls) Variable expenses Contribution margin Fixed expenses 870,000 580,000 374,000 Net operating income 206,000 Requlred: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. 2. Due to an Increase in labor rates, the company estimates that next year's varlable expenses will Increase by $3.00 per ball. If this change takes place and the selling price per ball remalns constant at $25.00, what wll be next year's CM ratio and the break-even polnt in balls? 3. Refer to the data in (2) above. If the expected change in varlable expenses takes place, how many balls will have to be sold next year to earn the same net operating Income, $206,000, as last year? 4. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash varlable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is bullt, what would be the company's new CM ratilo and new break-even polnt in balls? Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req 3 Req 4 Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls? (Round "CM Ratio" to 2 decimal places and "Unit sales to break even" to the nearest whole unit.) CM Ratio % Unit sales to break even balls < Req 1 Req 3 >
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